This section of the business planning process helps you to understand the historical performance of the industry, and its future prospects. It will show you whether the industry has been in a growth phase or a decline phase.

Every industry is growing, stagnant, or declining at any one time. You can also have product lines that may be in a decline phase but the industry is still strong as a whole.

For example, the Fashion industry appears to be growing all the time. However, over the past 10 years, certain styles have been incredibly popular, became average sellers, and then disappeared from the shelves. This is called a Product Life Cycle.

All product life cycles begin as a rush. A quick burst of speed up a sharp incline. Then the pace of sales slows and things level out. Eventually, sales will begin to drop, and the life cycle is then in its decline stage.

To know if your industry is in a growth, steady or declining stage, have a look at its historical performance. This data can be plotted on a graph that will give you a visual representation of the demand for the industry and its products.

If the curve of the graph is on an upward trend, then the industry is growing. If it is on a relatively flat trend, then it is in a steady stage, and if it is on a downward trend, then the industry is in decline.

This information is useful to help predict your future in business. Many large and small companies have survived these trends because they have adapted and introduced new products into their business. If your industry is in decline, then you should plan to introduce a new product or service that is in high demand and is expected to be so for a long time to come.

Understanding your industry

From your secondary research, plot the performance of the industry so far. To do this, you can use a spreadsheet program such as Microsoft Excel. Record the industry turnover (or revenue) per year for the records you have. Then, plot this as a line graph, which will show you a curve.

To help you get started, we have prepared another template that you can use. Download the Industry Performance Spreadsheet. You will need a program that can open a MicroSoft Excel document. All you need to do is fill in the required fields, and the template will automatically create the graph that you can use to interpret whether your industry is growing, steady or declining.

When you have analyzed your data, you should have a graph showing you the trend that the industry is in. Now, using your P&L reports complete the same analysis for your business. Once you have done this, you can compare the two graphs and see if you are performing as the industry is performing

If the industry has been performing at a higher growth rate, then it will show you right away that you will need to make some hard decisions about business growth in the next few months.

As another benefit of plotting your business’s historical performance, you will also be able to see what times of the year are your quietist, and how much growth you have achieved since you began to trade.

To help you and provide an example of how this data can be used, Steve calculated his results for Top Shelf Groceries. His performance has shown that he has grown on average approximately 3-4% each year. The Green Grocery industry, from Steve’s research, has grown at a similar rate, and is actually set to continue to grow at an average rate of 3% pa over the next 5 years. From this research, Steve knows that he can expect a healthy business climate over this time.

What does all this mean?

What this part of your industry research will show you is that if an industry is in a growth stage, demand from customers will be increasing, which means sustained business and revenue. If it is in a flat or declining stage, the number of successful businesses will drop, as the demand will drop.

If you are starting a new business, it is important to know if there is enough demand to make it work. If there is a decline in the amount of customers who might want to buy your product, then don’t start in that industry – UNLESS you have something very unique that will capture their attention.

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